What is the return on her strategyr in dollars

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Question: Long-short stub trade. Suppose Elena goes long 1 share of Creative Computers and short 0.7159 Ubid shares and that the risk-free interest rate is zero. a. Return on convergence. After the market closed on June 7, 1999 Creative Computers distributed all its Ubid shares to its shareholders on a pro-rata basis. This was 6 months after the partial IPO, as planned. Just before the distribution, Creative Computers' stock price was $31625 per share and Ubid was trading at $34 per share. What is the return on her strategyr in dollars? What is the return as a percentage of the initial long position? What is the annualized return? (You can also compute the convergence return using the prices just after the distribution, but it does not matter that much since the relative prices had converged already just before distribution.)

Reference no: EM133331529

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